The U.S. Small Business Administration has released a 1-page form which makes it simpler to request forgiveness of Paycheck Protection Program loans. It also includes newly revised forms to comply with the latest stimulus law.
The COVID-19 relief package that Congress adopted last month revived the PPP with $284 billion of financing for small-scale businesses looking for forgivable loans to help them deal with the financial fallout from the coronavirus pandemic. The law required that the SBA release simplified forms within 24 hours of the signing into law. This was done to make it easier to apply for forgiveness. Additionally, it included conditions that encourage banks in the community to lend more specifically to minority-owned companies that had difficulty getting loans in the past.
“The Small Business Administration met the requirement to issue the one page form for PPP loan forgiveness by 24 days after the date of the enactment of the Consolidated Appropriations Act, 2021,” wrote Ed Zollars who is a partner of Thomas, Zollars & Lynch CPAs, on his Current Federal Tax Developments blog for Kaplan Financial Education. “The agency also published new forms that were updated.”
First Draw PPP Loan forgiveness terms
Student Loan Debt Forgiveness After 10 Years – For borrowers who are eligible First Draw PPP loans are eligible to be forgiven. This is when the loan payment is made within an 8– to 24-week timeframe.
- It’s the same for compensation and employees.
- The loan proceeds can be used to cover payroll costs or other expenses that are eligible.
- A minimum of 60% of profits are used to pay for payroll expenses
Second Draw PPP Loan forgiveness terms
Second Draw PPP loans granted to eligible borrowers qualify for total loan forgiveness if they do so during the 8to 24 week covered period following loan disbursement:
- The levels of compensation and employee pay are maintained in the same manner as required for the First Draw PPP loan
- The loan proceeds are used on payroll costs and other eligible expenses; and
- A minimum of 60% of the proceeds go to payroll costs
- How and when to apply for loan forgiveness
A borrower may apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been utilized. Borrowers are able to apply for forgiveness anytime up until the date of maturity of the loan. If the borrower does not apply for forgiveness within 10 years of the last day of the covered period and the loan is not renewed, PPP loans are not deferred any longer, and the borrower will be required to make payment to their PPP lender.